Legislators in the House and the Senate introduced legislation, the Raise the Wage Act, to raise the federal minimum wage $15.00 per hour by 2024 and annually increase the federal minimum wage in subsequent years.
Small business owners know that more than doubling the federal minimum wage will lead to increased labor costs and tough choices. They must either increase the cost of their product or service – which in many cases is not feasible – or reduce labor costs elsewhere. The reduction in labor costs would be achieved through reduced jobs, reduced hours, or reduced benefits. None of these changes benefit employees.
The NFIB Research Center recently released a study,”Economic Effects of Enacting the Raise the Wage Act on Small Businesses and the U.S. Economy,” on the impact of the Raise the Wage Act on the economy and small businesses. The study found the following:
National Landscape: According to the NFIB Research Center’s economic forecast, the Raise the Wage Act would lead to massive output loss, job loss, and income reduction on a national scale.
- The cumulative real output loss would exceed $2.0 trillion with cumulative real GDP loss exceeding $980 billion over the ten-year forecast window.
- If the bill becomes law, there would be more than 6 million fewer jobs in the United States in 2029.
- Americans will have $103 billion less in disposable personal income in 2029.
- The act would reduce the number of able-bodied individuals participating in the labor force by more than 615,000 individuals in 2029.
Small Business Landscape: Small businesses would be particularly hurt by the Raise the Wage Act.
- More than 900,000 jobs lost, or 57 percent of all private sector job losses, would be at companies with fewer than 500 employees.
- Nearly 700,000 jobs lost, about 43 percent of all jobs lost, would be at businesses with fewer than 100 employees.
- The negative impact of the proposed legislation would fall disproportionately on small employers, which are less likely to have the cash reserves or profit margins to absorb the increase in labor costs than larger businesses.
Industry-Specific Landscape: The employment reduction in retail, food service, and administrative support account for nearly one quarter of lost jobs.
- The retail trade industry is forecast to have more than 162,000 fewer jobs by 2029.
- Food services and drinking places would have more than 165,000 fewer jobs by 2029.
- Administrative and support services would see a decline of more than 85,000 jobs by 2029.
- The forecast reduction in employment of the three industries combined is more than 392,000 lost jobs by 2029, approximately 24 percent of total forecast jobs lost.